I don't even understand the pitch? you have the disc playing, in your hands, your ownership, no buffering, no subscription required. and they're saying....hey do you want a worse experience?
They’re taking pictures of what you’re watching on the screen and sending it to random 3rd party data collectors to analyze and then harass you with ads.
Would it be possible to argue that this is copyright infringement? They're basically screencapping copyrighted content at a shitty framerate and distributing it over the internet.
They're not distributing it. They're taking a screenshot, identifying the content, and transmitting hashed and aggregated data. Even if they were transmitting screenshots, they'd be transmitting it to their own systems to be hashed and analyzed, not watched.
You agreed to it when you set up the device. It should be illegal to have incredibly obtuse and impossible to read T&C, they should make it abundantly clear exactly how much of your personal information is being given away, but unfortunately it's legal to just have a little checkbox that lets you lie about reading them.
No, see my comment to FlyingSquid about how I assume things work under the hood. The only logical design choice I can imagine is that a hash of the content snapshot is being computed locally, and only the hash is transmitted.